Question #44
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 18
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
The Gordon growth model is well suited for:
Answer Choices:
A. biotech firms
B. utilities
C. telecom companies
Explanation
Gordon growth model is best suited to firms that have a stable growth comparable to or
lower than the nominal growth rate in the economy and have well established dividend
payout policies. Utilities, with their regulated prices, stable growth and high dividends, are
particularly well suited for this model.